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Technology Stocks : IATV-ACTV Digital Convergence Software-HyperTV -- Ignore unavailable to you. Want to Upgrade?

To: SBerglowe who wrote (7770)	11/13/1999 10:48:00 AM
From: Carolyn	Read Replies (1) \| Respond to of 13157

StaggerLee also questioned the compensation plan when it was voted on last spring or so. I am skeptical, but will continue to hold long.

To: SBerglowe who wrote (7770)	11/15/1999 3:54:00 PM
From: Mike Fredericks	Respond to of 13157

Regarding the compensation plan, the execs can choose to take their compensation in stock (not options but stock) or cash. There was a big brouhaha raised about the compensation plan after the 1Q numbers came out (April-ish?). If the execs took their compensation in cash, the company would never turn a profit unless the P/E was ridiculously low. Reason is that the compensation given would be a multiplier greater than 1 times the earnings. That was my big point in April, and that's why I voted against the compensation plan. However, the execs took their compensation in stock rather than cash, and I also did analysis at that point that showed that the dilution caused by this small amount (relatively speaking) of added stock would not do a great deal of damage to the bottom line, in that the effect of dilution is always to multiply the earnings by a fraction less than one... it couldn't turn positive earnings negative. Two things since then have me pretty worried. First off, the non-cash charges vs. earnings. It's clear to me that if they take their compensation in stock, it's going to be charged vs. earnings the same way it would be charged if it were cash. That's bad. Second off, after the execs were given their stock after 1Q, they turned around and dumped it on the open market. That way they didn't have to take the cash from the company's coffers. Instead, they took it from us in the form of diminished stock price. The stock still hasn't recovered from that bombshell back in March/April. In fact, it was such a big deal that for 3-4 days Art S. was here absolutely blasting management. First time I'd heard him say such negative things about the company. I would encourage you to call investor relations for ACTV. Do not bother e-mailing or faxing them, you'll get a response about how they don't have time to engage in e-mail or fax conversations. My numbers show the following: 41MM +/- shares of stock in the company outstanding. Thus, for every point of increase in stock price, the market cap has gone up $41MM, and 2% of that is $800K. So, for an increase in stock price to be a net positive to the company, that point in stock price has to be accompanied by at least $800K in additional revenues in order to pay the executive compensation. Since we don't have much more than $800K in total revenues, I don't see his happening any time soon. Like I said, however, this is a great company and the stock is going to go up. It is unfortunate that management is so freaking boneheaded that they don't take traditional options. We'd take non-cash charges for them, but it wouldn't be the same. Just sell the stock 2-3 days before earnings to be safe. That's what I'll do. Then buy back the next week. -Mike